ArvinMeritor Inc.ARM

Morningstar Rating

Stock Research and Analysis

by David Manger

ArvinMeritor suffers from cyclical demand, intense competition, and rising raw-material costs. Although its commercial-vehicle business generates respectable profit margins and offers promising growth prospects, its light-vehicle segment routinely drains Read more

Bulls Say

Government-funded vehicle-scrapping programs could increase new vehicle sales, providing a near-term boost to struggling auto suppliers.

The average age among the current heavy-duty truck fleet is the highest in more than a decade. If the fleet remains at these levels when trucking shipments rebound, ArvinMeritor's aftermarket business could benefit.

ArvinMeritor has established itself as an international supplier, with more than half of its sales occurring outside North America. This breadth benefits the firm when supplying manufacturers with multinational operations.

Improved roads in China and South America could increase demand for heavy trucks.

Through a joint venture with Wabco, ArvinMeritor holds a leading market share for antilock brake systems required on all new commercial truck purchases in the United States. Read more

Bears Say

Low automotive production volume and financial distress at major manufacturers such as General Motors and Chrysler will continue to weigh on the light-vehicle segment.

Similar to many industry peers, the firm has a highly fixed cost structure that results in wide swings in profitability when sales fluctuate.

ArvinMeritor is vulnerable to rising raw-material costs as it struggles to pass on price increases to powerful customers.

Financial struggles at the firm's suppliers could result in production downtime if key suppliers are lost. ArvinMeritor has already provided financial support to several cash-strapped suppliers. Read more

Strategy

ArvinMeritor is attempting to sell its unprofitable light-vehicle business, which will allow the firm to concentrate on its core business, commercial vehicles. Within the commercial-vehicle business, Read more

Management

CEO and chairman Charles McClure joined ArvinMeritor in 2004. McClure is an industry veteran, serving in management and executive roles at Federal-Mogul FDML, Detroit Diesel, and Johnson Controls JCI. Management compensation seems reasonable and is Read more

Profile

ArvinMeritor was formed in 2000 through the merger of auto suppliers Meritor Automotive and Arvin Industries. The firm supplies original-equipment manufacturers and aftermarket Read more

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